Sanofi has agreed to buy Principia Biopharma in a deal that values the San Francisco-based maker of a promising treatment for multiple sclerosis at $3.4bn and pushes the French drugmaker further into autoimmune diseases.

It is the second and largest acquisition struck by chief executive Paul Hudson since he took over a year ago, and reflects his strategy of focusing on speciality medicines for cancer and rare diseases, rather than the mass-market cardiovascular and diabetes drugs that have traditionally generated its revenues.

With the deal, Sanofi acquires a pipeline of drugs known as BTK inhibitors that may help treat autoimmune disorders by curbing white blood cells known as B-cells from attacking healthy tissue.

Sanofi said in a statement that it would pay for the acquisition out of its cash reserves, and would offer $100 per share to Principia’s shareholders, which represents a roughly 10 per cent premium from Friday’s closing price. Principia’s shares have risen 66 per cent this year as some investors speculated about a Sanofi bid.

Sanofi has had a licensing deal with Principia Biopharma since 2017 to develop an experimental oral treatment that aims to alleviate symptoms of multiple sclerosis and other central nervous system diseases. At the time, Sanofi paid $40m upfront, and would have owed future milestone payments of up to $765m if the drug reached the market.

If the acquisition is completed as planned by the end of 2020, Sanofi would save on those payments.

In June, Sanofi began enrolling patients in large-scale clinical trials to prove the efficacy of the drug, dubbed BTK inhibitor ’168, and it is aiming to begin filing for regulatory approval in 2024.

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“This acquisition advances our ongoing R&D transformation to accelerate development of the most promising medicines that will address significant patient needs,” said Mr Hudson in a statement.

Analysts expect Mr Hudson to continue hunting for acquisitions given that Sanofi has capital to deploy after selling down its stake in US biotech Regeneron for $6.1bn in May.

Jefferies analyst Peter Welford wrote in note that Sanofi still has “firepower left for further bolt-on acquisitions”, and estimated that it could spend up to €25bn on deals as Mr Hudson puts his mark on the group.

“We like the relatively low risk value accretion of this deal with longer-term optionality that fits within the strategy of deploying firepower across numerous . . . deals,” he wrote.

Jefferies estimates that the BTK inhibitor ’168 could generate $2bn in global sales at peak if it is approved.

Sanofi was advised by investment bank Evercore and law firm Weil, Gotshal & Manges. Principia was advised by Centerview Partners and BofA Securities, as well as law firm Cooley LLP.

Via Financial Times